Eagle Investment Systems’ new Senior Principal of Investment Analytics, Mark Goodey discusses his role, the challenges facing risk and performance professionals on the buy-side and the impact new and emerging technologies are having on the industry.

Q: Mark, you spent over 20 years at buy-side firms including JP Morgan Asset Management, Aviva Investors and F&C Asset Management specialising in market risk and investment performance. What are the main challenges performance professionals run up against?

A: For the last 40 years the math of performance has been roughly the same. The models themselves haven’t really changed and the importance of data management has been consistent. Today, though the industry has become more complicated and the tools at our disposal have improved, we still spend the majority of our time managing data. As a result, I don’t know of many performance teams on the custody- or buy-side that have shrunk, they just keep getting bigger to cope with the increased data demands.

Q: How do you think new and emerging technologies like AI and robotics will shake up risk and performance measurement?

A: My background isn’t in technology but when you speak to technologists, the expectation is that robotics and AI will greatly improve automation. If we can get to a point where the performance and risk industry can rely on perfect data and have a functionally rich performance and risk system like Eagle with some kind of AI layer, you would then not only be able to measure the performance and risk by replicating the investment process, but also you’d be able to provide the client or portfolio manager with additional information to enable new insights.

Fixed income is straight math. The chances of going to a portfolio manager and telling them something they can’t work out on a spreadsheet is zero most of the time. Being able to provide new insights or deliver a new perspective on investment strategy can add real value. It’s a more behavioural science approach and at the moment, few are close to being able to give the client or portfolio manager that surprise factor.

In performance, there are only 10 or so methodologies in total. If you’ve got all 10 of those and perfect data, you can run any model against the data and then tell the same story in 10 different ways. One obviously has to be the way the portfolio manager is trying to explain it, but if you can add another nine it may help the manager learn something new and deepen their understanding of the unintended—or unconscious—consequences of their investment strategy.

Take, for example, a functional risk model that has exposure to the price of oil and steel but may not have any currency understanding. By being able to apply different models, not only could you measure the intended results, but you could also provide an understanding of the currency exposure. This would fundamentally change the role of an analyst and elevate their importance to both the portfolio manager and the end client.

That’s why people like me, who have been doing performance on the buy-side for 20 years, are getting really excited about the potential of new technologies—it really fires the imagination. That’s the direction Eagle is headed in and I’m excited about helping to shape that future.

Q: How might that affect how performance teams would work with the portfolio management team and their role within an organisation?

A: Ultimately, the performance measurement side of things should become completely invisible and seamless, and the team will be entirely focused on analysis. Currently you’ve probably got teams of 20 running measurement and two people doing analysis when it should be the other way around!

Over time I see the performance function within organisations becoming much more valuable while simultaneously less costly.

Q: What’s your vision for Eagle Performance?

A: Simply stated, it’s for us to be the premium place for investment managers to go for risk and performance. We are already well along that road; Eagle Performance comes with standard out-of-the-box functionality so firms can get up and running quickly, but with its rules-based engine it also offers almost unlimited flexibility to customise as business needs evolve.

This is key with a performance system because, unlike a trading platform that is largely an unchanging utility, it’s constantly evolving. There’s always a new instrument or a new calculation or risk to analyse. Trading a security is very different from getting all the analytics or economic exposures behind that security and being able to analyse it properly. Take the increased focus on ESG. As this trend develops and becomes more mainstream, further ESG factors will need to be brought into risk models. It doesn’t change the trading of the security but it certainly affects performance measurement.

Combine Eagle Performance with Eagle’s powerful data management platform, a very experienced team with deep institutionalised knowledge, and a wealth of resources to draw on across Eagle and BNY Mellon—I think that is the vision we are well placed to realise.

Q: What areas will you be focusing on to achieve that vision?

A: There are already some exciting developments underway. Eagle’s 2017 software release provided the foundation for Eagle’s digital transformation and move to a cloud-native architecture. Moving onto a cloud-native architecture will enhance the flexibility of Eagle Performance and make it even easier and quicker to get up and running.

At the same time, we are looking at additional services we can offer to our clients with their performance and risk measurement. Eagle has expertise to draw on across a number of different areas with technology experts, services teams and also professionals within BNY Mellon. With a lot of tools at our disposal and a great knowledge base to tap into across Eagle and BNY Mellon, I’m going to be firmly focused on how we can bring new things together to imagine new opportunities.

Mark Goodey will present Eagle’s Performance Roadmap at ENGAGE18, taking place at Boca Raton Resort & Club, Florida between April 22-25. For more information, visit www.eagleengage.com